Archstone Hudson Park – Unconscionable?
A story from the New York Times following up from the news this past May that Archstone was sold to Tishman Speyer:
Deal Is Complete to Take Archstone REIT Private
After a few weeks’ delay caused by the credit squeeze, the New York real estate company Tishman Speyer Properties and its financial partner Lehman Brothers yesterday completed their $22.2 billion purchase of Archstone-Smith Trust, a real estate investment trust with 359 apartment complexes, mainly on the East and West Coasts.
The deal, announced in May, is the second-largest privatization of a public real estate company after the Blackstone Group’s $39 billion acquisition of Equity Office Properties in February.
With nearly 88,000 apartments, including those under construction, Archstone, based in Englewood, Colo., is the nation’s biggest public apartment company in terms of market and equity capitalization.
In October 2006, Tishman Speyer became a major player in the rental housing business when it paid $5.4 billion for Stuyvesant Town and Peter Cooper Village, two giant apartment complexes in Manhattan. Tishman Speyer also controls Rockefeller Center and the Chrysler Building.
When the Archstone transaction was first announced, some analysts said the price of $60.75 a share was too low. But as the market for securities backed by commercial mortgages dried up in the wake of the subprime mortgage problems, analysts wondered whether the deal would be completed, despite the $1.5 billion breakup fee.
The financing was greatly eased by Fannie Mae and Freddie Mac, which acquired a total of $9 billion in loans.
In addition, a private company, the Irvine Company of Newport Beach, Calif., agreed to buy a 90 percent interest in 16 Archstone-Smith apartment complexes in Orange and San Diego Counties. The price was not disclosed, but a real estate specialist involved in the transaction said the Irvine Company paid $1.4 billion.
The Irvine Company also made an equity investment in the deal as a whole, but the size was not disclosed.
In one unusual feature of the privatization of Archstone, R. Scott Sellers, the chairman and chief executive, will continue to work for the new partnership.
According to Green Street Advisors, a research company in Newport Beach, Calif., the value of the assets owned by apartment REITs has declined an average of about 8 percent since June.
But for Tishman Speyer, the deal makes as much sense now as it did in May, said Keven S. Lindemann, the director of real estate for SNL Financial, a research company in Charlottesville, Va.
“They are looking at a longer-term play here,” he said. “What’s happened in the capital markets may not be that big an issue.”
5/30/2007 Update – Sold!:
Archstone-Smith Trust has been sold to Tishman Speyer Properties and Lehman Brothers for $13.5 Billion, which opens the door to the possibility of condominium conversions at 77 Park Avenue and 300
Adams Grand Street.
Archstone couldn’t convert its Hoboken apartments to condos because it was specifically set up as an apartment trust. Now that Tishman and Lehman are buying Archstone, they will have the right to condo convert 77 Park if they think it could give them a higher return on their investment. If the buyers are happy with the proceeds of the recent Archstone rent increases, they could also leave the rental buildings as is.
Archstone is the second-largest apartment real estate investment trust with 86,000 apartments. Tishman-Speyer is a New York City-based developer that deals mostly in commercial real estate, including the Chrysler Building and Rockefeller Center. Last year Tishman paid 5.4 billion dollars to buy the massive Stuyvesant Town-Peter Cooper Village apartment complex on Manhattan’s lower east side. Tishman is also developing a thousand condos in San Francisco.
Just a little update. Hoboken City Council members Terry Castellano and Mike Russo are scheduled to meet with Archstone representatives today. After receiving over 80 letters complaining about the ren increases, they are apparently trying to “negotiate” how high Archstone can raise their rents. Not sure what the reaction or end-result is going to be. Despite the negative press and the pending state action regarding the exemption, residents still indicate that the price-gouging is continuing full-steam.
Various people have mentioned recent MONTHLY rent increases of $500, $600, and even a $900 bump, which is forcing one tenant to leave. They say Archstone isn’t budging. It seems as if people are leaving left and right, because it’s reported that the hallways have recently been reeking of fresh paint (meaning many apartments are being touched up after vacancy.)
But hey, all is not lost. They’re working furiously at getting the high-tech and desperately needed “internet cafe” ready in time for the 1998 Super Bowl.
12/11/2006 Another Update:
This post w/ comments is one behemoth! I may have to split it one of these days.
Tenant movement going strong (from a resident): I just want to let you know that this Archstone movement is still going strong. Tonight, City Council members Terry Castellano and Mike Russo came to Archstone 77 Park, knocked on tenants doors, going floor by floor gathering tenants, urging them to write emails stating their concerns about rent increases. Concerned tenants, if they missed the floor by floor meetings ,can send their emails to email@example.com. They will be forwarded directly to Mike Russo.
Additionally, here’s another interesting Google Maps mashup. Thanks, YipYap for reminding us of this site. It’s called Rentometer, which compares rent to nearby properties. I punched in 77 Park @ a current rent of about $2900 (which is in range of their advertised rents). It’s by far the most, and WAY off the scale. So if this is anywhere near accurate information, what is Archstone thinking?
Click HERE TO SEE THE LINK, picture below.
This past weekend, the Hoboken Reporter finally published their take on this absurd rent increase situation at Hudson Park.
For those that haven’t seen it yet, here’s the link, or you can read the article below:
Steep rise in rents at one building (Hoboken Reporter)
Tenants at the Archstone Hoboken, a 14-story, 302-unit luxury apartment complex at 77 Park Ave., received the unwelcome news this holiday season that their rents are slated to increase up to 55 percent in February, 2007.
Hoboken rent control laws prevent most landlords from increasing their tenants’ rents more than 2 or 3 percent per year, according to the increase in the federal Cost of Living Allowance. However, those laws mainly pertain to older buildings.
A state law was passed in 1987 exempting new buildings of four or more units from rent control, as a way to entice companies to construct rental buildings throughout New Jersey in order to meet an increasing demand. Due to confusion with some of the aspects of the law, it was overwhelmingly approved again in 1998, with 38 state senators and 67 Assembly members voting in favor of it and two senators and 12 Assembly members not taking part in the vote.
But just because a building is allowed to increase or decrease its rents to meet the free market, does it make it okay to increase them as much as they want?
That’s what some tenants want to know.
“How could you expect someone to pay a thousand dollars more from one month to the next?” asked one concerned tenant who refused to give his name, saying he feared retribution from management. “Raising someone’s rent 55 percent from one year to the next is unconscionable.”
The Archstone Hoboken is not the only building in the city exempt from local rent control laws. Other relatively new residences include the Grand Adams, also owned by Archstone-Smith, as well as the Tea Building, the Metropolitan, and the Constitution North.
Archstone-Smith purchased the building from The Pegasus Group in July of 2004. The $19 billion company is based out of Colorado.
Archstone Hoboken’s community manager, Sarah Day, was unable to be reached for a comment on this story last week.
All tenants, upon signing their lease, had to sign an additional form acknowledging that they knew the units are not protected by local rent control laws.
In a letter issued to tenants about the rent increase recently, Archstone-Smith wrote, “Extensive market surveys confirm that apartment rates have increased significantly throughout the greater New York area. Over the last several years, the prior owner did not raise rents in response to changing market conditions. As a result, the rental rates have slipped well below the value of apartment housing. We’re pleased our residents enjoyed this temporary pricing benefit and now, deem it appropriate to raise prices to accurately reflect market conditions.”
10 percent and up
The Archstone rent increases, set to go into effect next year, start at 10 percent. According to tenants, they were determined by a computer program used by Archstone-Smith. The program assessed the apartments’ current market value – taking into account its location and amenities – and then compared it with the rent tenants were actually paying.
Some tenants who are unable to afford the increase are looking elsewhere for more affordable units, while others have decided to organize and fight the increase.
Not taking it lying down
Tenants said that after they held meetings inside the building’s gym to address the issue, they received a notice from management stating that the fitness center was an unacceptable meeting area, and that all meeting organizers would be required to submit request forms before holding similar events in the building – so that company “associates” could be present.
Residents said that in order to stay anonymous from the management, they held two other meetings offsite, one at Texas Arizona at 76 River St. and the other in the backroom of The Shannon Lounge at 106 First St.
According to event organizers, 150 tenants have expressed concern over the increase, although only 35 tenants showed up at The Shannon Lounge this past Monday, Dec. 4 to discuss their options in stopping the increase.
Also on hand Monday night were 1st Ward Councilwoman Theresa Castellano, in whose district the apartment complex is located, and 3rd Ward Councilman Michael Russo.
In addition to showing support for their constituents, the two local politicians offered to act as mediators between the tenants and Archstone to create a buffer to prevent the building management’s retaliation, which apparently was a fear of some of the tenants.
The tenants are also devising a three-pronged plan of attack in the hopes of forcing Archstone to reconsider the increase.
The first phase, they say, will include drafting a list of alleged problems in the building, such as, doors that allegedly don’t lock and conditions in the gym.
The tenants have also been voicing their concerns on community websites.
The tenants say their last resort will be to refuse paying the rent increase, forcing management to take them to tenant-landlord court.
According to Carol McLaughlin, the division chief of Rent Leveling and Stabilization for the city of Hoboken, appearing before a Hudson County judge is the tenants’ best bet for prevention.
“You have to fight it and argue that it’s an unconscionable increase,” said McLaughlin. “I can’t imagine them losing the case.”
According to the “Truth in Renting” booklet available at City Hall, “unconscionability is defined in terms of [an] action which would not be acceptable to any fair or honest man.”
On May 10, 1987, Union County District Court found an increase of more than 10 percent to be “unconscionable” in the case of Philip Sgroi versus Ricky L. Rosenbaum and Karen Arkenau.
Michael Mullins can be reached at firstname.lastname@example.org.
“You have to fight it and argue that it’s an unconscionable increase.” – Carol McLaughlin.
Last night a shade under 40 people showed up to the Shannon Lounge to discuss the issues they’re having with the Archstone building. 1st and 3rd Ward Council members Terry Castellano and Michael Russo were on hand to aid the residents in any way they could. The Hoboken Reporter was also present and promised to publish an article to help with the publicity.
While they indicated that it’s an uphill battle, and some recent cases against big-building operations were unsuccessful (read: Tea Building), they are going to put up a fight. In addition to Mike and Terry coming to the building next week to go floor-to-floor to meet each resident, 100’s of individual letters are being crafted, and will arm the Council members with ammunition to make a strong case. They’re even attempting to meet with Archstone representatives themselves, which may or may not pan out. Only time will tell.
Read all that led up to this after the jump.
(Sorry for the poor pic. Only took one. Always take a couple to ensure a good shot..)
Important tenant meeting TONIGHT at 8pm at the Shannon Lounge (back room).
Anyone that cares about this is strongly encouraged to attend. You never know who may show up!
Continue reading all that’s happened up to now after the jump:
So this article has really become a hot-button topic in Hoboken, and the second most commented post on Hoboken411. Wow.
My question to all the 77 Park residents is, has anything substantial happened since this revolution against the asinine rent nonsense began? Myself, along with countless others, forwarded this information to numerous news outlets and other agencies. Has there been any meaningful progress?
Many people seemed to have teamed up, building a resistance to this “corporate bullying” (I love that phrase). I just hope that it isn’t a gargantuan waste of time, effort and hope.
Please let us know!
11/22/2006 Another Update:
Any readers know the best way to get a local news channel to come investigate this nutty situation at 77 Park? Like that ball-busting Arnold Diaz from “Shame on You”.. or “7 on your side”? The satellite vans would certainly get some attention.
Also the residents from this building are encouraged to put their ratings on this public apartment info website here:http://www.apartmentratings.com/rate/NJ-Hoboken.html
Their ratings have slumped considerably since 2003 when the previous company was managing it.
Here’s a few documents you can view:
1. The notice that Archstone left under tenants doors (a “courtesy update” indicating that they’re “pleased residents enjoyed this temporary pricing benefit”): HERE.
2. A notice indicating the Archstone takeover of the property a little over 2 years ago: HERE.
Enjoy the documents. Feel the anger.
11/21/2006 Afternoon Update:
Whoa Nelly! It seems as if “management” has gotten word of this tenant uprising and is doing everything they can to meddle with their ability to congregate on the property, cowardly citing “safety reasons”. Read more about this in the comments section!
This topic has been brewing for quite some time, but as of recently it seems to have reached a boiling point. Hoboken411 is not a tenant of 77 Park, however, the chatter (not terrorist) starting to surface merits serious public notification and discussion.
The background: 77 Park (or Hudson Park as it may be called) is a relatively new building completed in 2000. It was originally run by The Pegasus Group. You can see some details HERE. Email 411 if it gets removed. We have backup copies. This location is now run by Archstone Properties. This building has approximately 300 rental units, 450 parking spots (public and private) and various standard amenities that buildings like this typically have. Plus it’s close to the PATH. Seems like a normal building in a normal town, doesn’t it?
The issue: It seems as if renters are getting taken to the cleaners (is that why we have so many in Hoboken?). Kidding aside, discussion on various Hoboken message forums and amongst residents has clearly indicated that they feel that the price increases over that past few years, and especially recently has been EXORBITANT and UNFAIR. Increases ranging from multiple 7% increases in one year, to 24%, to 35%, and more! Some people were presented with $1000 increases in monthly rent! But this time, rather than just “taking it”, residents of 77 Park have begun to fight back.
What started out as one tenant’s livid reaction to the unconscionable increase has now begun to steamroll into a grass-roots effort to challenge this corporate bullying. With over 50 tenants already teaming up, brainstorming and planning, this may well increase to over 100. Local media outlets will be notified, and they will not go down and out without a fight. But we’re sure with the money Archstone is rolling in now they can afford the best lawyers in the country.
Here are some quotes, figures and examples of the reaction to these insane and unexpected costs:
- Archstone seems to think its justified in raising rents to so-called competitive market rates and rumor has it they are standing by a take it or leave it approach
- While some realtors are even shocked at the rent increases (incredible, eh?)
- Since Archstone took over, many tenants feel that quality of living conditions have declined dramatically
Some recent rent increases:
- One tenant was offered an 8 month lease with a rent increase of approx 7%, the tenant then received another lease at the end of the 8 month period with another raise of approx 7%. The point, two rent increases in one year.
- Another tenant got offered an increase from $1800 to $2800. He refused.
- Another from $2100 to $2900 (35%), and another from $2500 to $3100 (24%)
Other Hoboken411 observations:
Last year, Archstone settled a more than $20 million dollar lawsuit involved handicapped access. Another $25 million dollar settlement for mold infestation in 2003. ARE THEY LOOKING TO RECAP THESE LOSSES AT THE EXPENSE OF TENANTS?
The rent increases over the past few years does not seem in line with recent trends. Just as recently as a few years ago (see numbers below), the estimated rent revenue for the entire building (not including parking, amenities, or pet fees) was in the neighborhood of $8.5 million dollars. Using today’s numbers from Archstone’s website, the average annual revenue for the same units is approximately $12.25 million dollars. A nearly $4 million dollar increase! For what? Is the building not profitable enough? Various trend analysis show average rentals for 1BR and 2BR rising from between 11%-24% over the past 5 years. Not 45%! Do they just want their stock to rise so the corporate officers and stockholders get richer while the tenants are selling pencils on the street? (or in this day and age, it’d have to be iPods or cell phones)…
Archstone’s ticker symbol is ASN. They have a current market cap of about $13 billion dollars. They’re in the S&P 500. The CEO made $2.5 million plus over $7 million in exercised stock options last year. The company has elected to be taxed as a REIT and it would not be subject to federal income tax, provided it distributes at least 90% of its taxable income to its shareholders. Archstone-Smith, formerly known as Archstone Communities Trust, was founded in 1963 and is headquartered in Englewood, Colorado. This building in Hoboken represents approximately 1% of their $1.22 billion dollar 2005 annual revenue (based on Hoboken411’s fruity and fuzzy math.)
Look at how they’ve profited over the past five years!
Ok readers, what are your thoughts?
- Do you believe in fair market value? Are these rents sensible for a town like Hoboken?
- Do you feel the dramatic annual rent increases are fair? Or should there be some kind of limit as to how much a monthly rent can increase with the same tenant?
- Anyone live there? What are your feelings?
- Anyone else paying similar rents in Hoboken?
Discuss amongst yourselves!
Click below to read more about NJ law regarding:
- Unconscionable Rent Increases (N.J.S.A. 2A:18-61.1(f))
- The Burden of Proof and
- What the Landlord has to specifically prove in order to warrant such rent increases
Unconscionable rent increases
Under the Anti-Eviction Act, a landlord cannot make you pay an increase in rent that is so large that it is unconscionable, meaning that it is extremely harsh or so unreasonable as to be shocking. Unconscionability is not important to tenants if the apartment, house, or mobile home is covered by a rent control ordinance adopted by the city or township. In that situation, rent control limits the amount of the rent increase. Also, if you live in subsidized housing, or receive Section 8, federal law will determine how much your rent can be increased. In all other cases, the only protection you have is that the statute states that the rent increase cannot be unconscionable. Cite: N.J.S.A. 2A:18-61.1(f).
Whether an increase is unconscionable depends on the facts of each case. The eviction law does not state what makes an increase unconscionable. In deciding disputes between tenants and their landlords over rent increases, judges have not defined how large an increase must be in dollars or percentages to be unconscionable. It is clear that some rent increases are unconscionable because the increase is much larger than the prior rent, or because the landlord has asked for many small increases in a short period of time that all add up to a large increase. For example, an increase of over 20 percent, if made by the landlord without a very good reason, could be unconscionable. Even a five percent increase could be unconscionable if the conditions in the building are very bad and the landlord has failed to make needed repairs.
If you believe that the rent increase your landlord is asking for may be unconscionable, you can refuse to pay the increase. Your landlord can then take you to court to try to evict you for nonpayment of the rent increase. If the notice ending your lease and increasing your rent is proper, then you can defend against the increase in court by arguing that the increase is unconscionable.
Burden of proof:
If the landlord takes you to court, it will be up to the judge to decide if the increase is unconscionable and if you have to pay the increase or be evicted. The burden of proof is on the landlord to show that the rent increase is fair and not unconscionable. Cite: Fromet Properties, Inc. v. Buel, 294 N.J. Super. 601 (App. Div. 1996). If the landlord is not prepared to prove that the increase is fair when the matter is scheduled for trial, the court can grant an adjournment (postponement) in the interest of justice.
In eviction cases, tenants are not allowed to examine the landlord’s books or documents before the trial. Problems will arise if a landlord comes to court with detailed records that a tenant has never seen and may want to challenge. If this happens, the tenant should ask for an adjournment in order to have time to review the landlord’s documents. In a complicated case, the tenant may also ask the court to transfer the matter to a different court—the Law Division of the Superior Court—in order to review the landlord’s records and challenge them through legal procedures such as discovery.
What does the landlord have to prove?
The judge should require the landlord to show that the large increase sought is justified because his expenses are more than his rental income, or that he is making an insufficient profit. Other factors that the court may look at in deciding whether a rent increase is fair and not unconscionable are:
- The amount of the proposed rent increase.
- How the existing and proposed rents compare to rents charged at similar rental properties in the same geographic area.
- The relative bargaining position of the parties—who has the most power in determining what should be a fair rental.
- Based on the court’s general knowledge, whether or not the proposed rent increase would “shock the conscience of a reasonable person.” Cite: Fromet Properties, Inc. v. Buel, 294 N.J. Super. 601 (App. Div. 1996). There also may be other factors that courts will examine.
For example, if a landlord claims heavy expenses due to repairs, the landlord should be required to show that improvements were made to the rental units or the building and that these improvements mean better living conditions for tenants. Also, if a landlord spends a lot of money to make a major repair that will last for many years—such as replacing the entire roof of the building or buying all new refrigerators—the tenants should not have to pay the entire cost of the repair in a single rent increase. The increase should be spread out over the life of the repair. (For example, if a landlord spends $15,000 to replace a roof, and the new roof will last 15 years, the rent increase passed on to all the tenants should only be for $1,000 total, since the tenants will be paying that amount each year for the next 15 years.)
A landlord should not be allowed to charge tenants for improvements that the landlord had to make to bring the building into compliance with housing and health codes. Tenants have a right to safe and decent housing and should not be penalized simply because a present or former landlord did not make repairs to the building. Cite: Orange Taxpayers Council. Inc. v. Orange, 83 N.J. 246 (1980).
Some judges do not, however, take these factors into account when ruling on whether a rent increase is unconscionable. Instead, there are judges who believe that landlords can double or triple the rent simply by showing that other apartments in the area are renting for a similar amount.
Once the landlord tries to prove that the rent increase is fair and not unconscionable, a tenant can dispute the accuracy of the landlord’s statements and try to show that the increase simply is not fair.
The above taken from LSNJ LAW website: http://www.lsnjlaw.org/english/placeilive/irentmyhome/tenantsrights/chapterseven/index.cfm
Original Entry in Hoboken411:
Description – Luxury rentals close to the PATH station.
Services – Studios start at $1835, 1 bedrooms at $2025, 2 bedrooms at $2550 and 3 bedrooms at $3470. Door attendant, Fitness center, Near Ferry & PATH, Dry cleaning service, on-site parking, Pet friendly, manhattan views, parking
Website – www.archstoneapartments.com
Address – 77 Park Ave, Hoboken, New Jersey ( NJ ) 07030
Telephone – (201) 653-7400
Don’t believe the prices listed above.. they’re raising rates through THE ROOF!